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Exam 1: Financial Statements and Business Decisions

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Question 31

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During the current fiscal year,a company had revenues of $400,000,cost of goods sold of $280,000,and an income tax rate of 30 percent on income before income taxes.What was the company's current year net income?

A) $120,000
B) $36,000
C) $84,000
D) $400,000

E) A) and B)
F) None of the above

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Question 32

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Which of the following transactions affects both the income statement and the statement of cash flows?

A) Selling stock in exchange for cash.
B) Declaring and paying a cash dividend.
C) Selling a product to a customer which creates an account receivable.
D) Paying employee wages as they are earned.

E) C) and D)
F) B) and C)

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Question 33

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Alfred Company manufactures men's clothing.During 2019,the company reported the following items that affected cash.Indicate whether each of these items is a cash flow from operating activities (O),investing activities (I),or financing activities (F).

Why does a company hire independent auditors?

One of the advantages of a corporation when compared to a partnership is the limited liability of the owners.

Which of the following best describes the balance sheet?

Describe the elements of the balance sheet equation.

Due to the relationships among financial statements,the statement of stockholders' equity links the income statement to the balance sheet.

Husky Company has provided the following information for its most recent year of operation: Cash collected from customers totaled $89,300. Cash borrowed from banks totaled $31,700. Cash paid to employees for salaries totaled $32,100. Cash received from selling Husky common stock to stockholders totaled $41,000. Cash payments to banks for repayment of money borrowed totaled $7,500. Cash paid to suppliers totaled $12,500. Land costing $25,000 was sold for $25,000 cash. Cash paid for dividends to stockholders totaled $3,300. - How much was Husky's cash flow from operating activities?

In the United States,generally accepted accounting principles are published in the FASB Accounting Standards Codification.

Which of the following equations best describes the income statement?

Lorenta Company has provided the following data (ignore income taxes) : 2019 revenues were $117,300. 2019 expenses were $47,800. Dividends declared and paid during 2019 totaled $9,500. Total assets at December 31,2019 were $177,000. Total liabilities at December 31,2019 were $89,000. Common stock at December 31,2019 was $28,000. Which of the following is not correct?

For Glad Rags Shops,the following information is available for the year ended December 31,2019: Dividends declared $10,000 The income tax expense is $150,000. Prepare an income statement for Glad Rags Shops.

Laker Company has provided the following information for its most recent year of operation: Cash collected from customers totaled $99,300. Cash borrowed from banks totaled $42,700. Cash paid to employees totaled $23,300. Cash paid for rent totaled $3,100. Cash received from selling an investment in Husky stock totaled $73,000. Cash payments to banks for repayment of money borrowed totaled $9,700. Cash paid for operating expenses totaled $11,200. Land costing $75,000 was sold for $75,000 cash. Cash paid for dividend payments to stockholders totaled $7,700. Calculate Laker's net cash flow from investing activities.

Describe the roles of the Securities and Exchange Commission and The Financial Accounting Standards Board with respect to the development of Generally Accepted Accounting Principles.

A calendar year reporting company preparing its annual financial statements should use the phrase "At December 31,2020" in the heading of which financial statements?

Which of the following would not be found on the statement of cash flows?

When would a company report a net loss on the income statement?

Laker Company has provided the following information for its most recent year of operation: Cash collected from customers totaled $99,300. Cash borrowed from banks totaled $42,700. Cash paid to employees totaled $23,300. Cash paid for rent totaled $3,100. Cash received from selling an investment in Husky stock totaled $73,000. Cash payments to banks for repayment of money borrowed totaled $9,700. Cash paid for operating expenses totaled $11,200. Land costing $75,000 was sold for $75,000 cash. Cash paid for dividend payments to stockholders totaled $7,700. Calculate Laker's net cash flow from operating activities.

Baseline Corporation was formed two years ago to manufacture fitness equipment.It has been profitable and is growing rapidly.It currently has 150 stockholders and 90 employees;most of the employees own at least a few shares of Baseline's common stock.The company has received financing from two banks.It will sell additional shares of common stock within the next three months and will also seek additional loans and hire new employees to support its continued growth. 1.Explain who relies on the information in financial statements prepared by Baseline Corporation. 2.Why is compliance with generally accepted accounting principles and accuracy in accounting important for Baseline?